Collins Ltd. has these transactions related to intangible assets and goodwill in 2015, its fi rst year

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Collins Ltd. has these transactions related to intangible assets and goodwill in 2015, its fi rst year of operations:
Jan. 2 Purchased a patent with an estimated useful life of five years and a legal life of 20 years for $40,000.
Apr. 1 Acquired another company and recorded goodwill of $300,000 as part of the purchase.
July 1 Acquired a franchise for $250,000. The franchise agreement is renewable and not expected to expire.
Sept. 1 Incurred research costs of $150,000.
30 Incurred development costs of $50,000. A marketable product has been identified and production will commence in the near future.
Dec. 31 Recorded annual amortization.
31 Tested the intangible assets for impairment. Recoverable amounts exceeded carrying amounts in all cases. Also tested goodwill and determined that it had a recoverable amount of $270,000.
Instructions
(a) Prepare the entries to record the above transactions. Assume all costs incurred during January through September were incurred for cash.
(b) Show the presentation of the intangible assets and goodwill on the statement of fi nancial position at December 31.
Goodwill
Goodwill is an important concept and terminology in accounting which means good reputation. The word goodwill is used at various places in accounting but it is recognized only at the time of a business combination. There are generally two types of...
Intangible Assets
An intangible asset is a resource controlled by an entity without physical substance. Unlike other assets, an intangible asset has no physical existence and you cannot touch it.Types of Intangible Assets and ExamplesSome examples are patented...
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Financial Accounting Tools for Business Decision Making

ISBN: 978-1118644942

6th Canadian edition

Authors: Paul D. Kimmel, Jerry J. Weygandt, Donald E. Kieso, Barbara Trenholm, Wayne Irvine

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